Sources converge on haircut above 50 percent
Eurogroup head Jean-Claude Juncker confirmed on Saturday there are talks for a Greek debt haircut in excess of 50 percent, while a French newspaper claimed there is an agreement with banks for a slash between 50 and 55 percent.
On his way to the Ecofin meeting of European Union economy and finance ministers in Brussels, the Luxembourg Prime Minister said there were negotiations for the reduction of the value of Greek state bonds by more than 50 percent, but avoided making a specific reference to the haircut rate that is on the table.
Juncker added that the eurozone finance ministers agreed in Friday?s Eurogroup meeting to ask Greek banks to take much heavier losses that those provided by the July 21 agreement. The eurozone summit had then agreed to a 21-percent haircut.
Newspaper Les Echos cited on Saturday a diplomatic source saying that the Eurogroup decided on Friday to ask Greek commercial banks for a haircut of 50 to 55 percent, otherwise Greece would default.
It followed a troika report on Friday informing the Eurogroup that Greece would require much more assistance from governments and a greater involvement by the private sector (PSI), ?which is a vital issue for the sustainability of the Greek debt.?
On the other hand, former European Central Bank vice-president Lucas Papademos wrote in Friday?s Financial Times that ?the likely financial benefits of debt restructuring would be much smaller than is often envisaged, [as] the process entails significant risks for Greece and the euro area. For institutional, political and legal reasons, there can be no debt restructuring resulting in losses that would burden official debt holders,? that at the end of July accounted for almost a third of Greek government debt.
